Businesses often fail to recognize the risks they face and do not take the necessary steps to prevent the risks from becoming reality. Being forewarned is forearmed.
In separate research from Nottingham University Centre for Risk and Insurance Studies,
it shows that the most common reason for failure is either due to poor customer targeting, failure to meet customer needs or lack of market research, or associated with cash flow and cost control.
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Reducing risk through marketing
Richard Neal whose business, Lancing Press, ran into trouble after it acquired a distressed company with low margins and late payers believes it is vital to understand your customers, and also their value.
This resulted in a £45k loss, admits Richard. “Now, we target clients instead of letting those clients target us. Our account managers do credit checks on companies we wish to deal with. We prioritize those that will be less hassle and more profitable.”
Getting a grip on cashflow
RSM Tenon’s Ian Cadlock advises companies to ignore their numbers at their cost. “Many companies ignore their numbers because they do not understand their importance, and this leads to a lack of knowledge about the business at any time,” he says.
It is important to keep a firm grasp of the finances since they can help with cash flow as well as identify any trouble spots within the business. “If you are just letting your fingers go, you will not know what you are doing,” he adds.
Keeping an eye on the future
“I’m not seeing people putting their tax money on the side,” he says, “they invoice for $1,000 and charge VAT, but they don’t have the cash to cover the bill at the end of a VAT quarter.”
It is also risky business to scrimp on staff. Taking on work that should be left to others is a classic business error that prevents business directors from concentrating on the growth of the business.Also read 10 Importance of Business Plan
The director understands that bookkeeping is something that can be accomplished in a day, but he should know better. Every armies needs bottle washers and cooks.
There are real risks to small businesses that cannot be controlled entirely by owners and managers.
Sound financial management and effective marketing can go a long way in giving your business a solid foundation for survival, from the toughest of trading conditions, even.